Microsoft, McDonald’s Amongst 13 Corporations To Reward Buyers With Elevated Dividends

McDonald”s Corporation will announce its 50th year of dividend growth in September.

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This is the latest in my series of articles where I provide predictions of annual dividend increases for long-term dividend growth companies. At the end of July, I provided predictions for 14 dividend growth companies that have historically announced annual payout increases in August. In this article, I’ll look at another 13 dividend growth companies that I expect will announce their annual dividend increases in September.

Here are the results from my predictions from August (the original predictions are available here), followed by my predictions for the dividend increases that I’m expecting to be announced in September:

(All yields are based on stock prices at the market close on Friday, August 30th.)

Results for Dividend Increase Announcements from August

American Financial Group, Inc. (AFG) – 20 years of dividend growth

Prediction: 10.6 – 13.4% increase to $3.14 – $3.22

Actual: 12.7% increase to $3.20

Forward yield: 2.39%

The property and casualty insurer maintained its compounded dividend growth rate of 12 – 13%.

American States Water Company (AWR) – 71 years

Prediction: 7.2 – 8.5% increase to $1.844 – $1.866

Actual: 8.3% increase to $1.862

Forward yield: 2.29%

The water utility begins its 8th decade of dividend growth with a nice increase.

Note: In last month’s article, I had the incorrect dividend amounts for my prediction. I’ve corrected them above.

BancFirst Corporation (BANF) – 32 years

Prediction: 4.7 – 7.0% increase to $1.80 – $1.84

Actual: 7.0% increase to $1.84

Forward yield: 1.73%

Dividend growth continues to slow at the Oklahoma-based bank but is still very robust.

Badger Meter, Inc. (BMI) – 33 years

Prediction: 18.5 – 22.2% increase to $1.28 – $1.32

Actual: 25.9% increase to $1.36

Forward yield: 0.66%

Badger Meter follows up last year’s 20% increase with an even larger increase this year.

Broadridge Financial Solutions, Inc. (BR) – 18 years

Prediction: 8.8 – 11.3% increase to $3.48 – $3.56

Actual: 10.0% increase to $3.52

Forward yield: 1.65%

The 10% boost from the financial technology company is nearly identical to last year’s increase.

CBOE Global Markets, Inc. (CBOE) – 15 years

Prediction: 10.9 – 12.7% increase to $2.44 – $2.48

Actual: 14.5% increase to $2.52

Forward yield: 1.23%

CBOE’s dividend growth announcement is an acceleration from last year’s 10% increase.

Carlisle Companies Incorporated (CSL) – 49 years

Prediction: 12.4 – 14.7% increase to $3.82 – $3.90

Actual: 17.6% increase to $4.00

Forward yield: 0.94%

Renewed earnings growth powered accelerating dividend growth from the building products company.

Dover Corporation (DOV) – 70 years

Prediction: 1.0 – 2.0% increase to $2.06 – $2.08

Actual: 1.0% increase to $2.06

Forward yield: 1.11%

This is the 5th straight year of 2-cent annual dividend growth from Dover.

Federal Realty Investment Trust (FRT) – 58 years

Prediction: 0.9 – 1.8% increase to $4.40 – $4.44

Actual: 0.9% increase to $4.40

Forward yield: 3.83%

Like Dover above, Federal Realty continued its slow dividend growth rate this year.

Ingredion Incorporated (INGR) – 15 years

Prediction: 7.1 – 10.3% increase to $3.34 – $3.44

Actual: 2.6% increase to $3.20

Forward yield: 2.38%

Dividend growth slowed at the food ingredient company from last year’s 10% increase.

Intuit Inc. (INTU) – 14 years

Prediction: 14.4 – 16.7% increase to $4.12 – $4.20

Actual: 15.6% increase to $4.16

Forward yield: 0.66%

The financial software company maintains its record of 10%+ annual dividend growth.

MGE Energy, Inc. (MGEE) – 49 years

Prediction: 4.5 – 5.8% increase to $1.79 – $1.81

Actual: 5.3% increase to $1.80

Forward yield: 2.08%

The natural gas and electric utility continues to announce 5% annual dividend increases.

Altria Group, Inc. (MO) – 55 years

Prediction: 3.1 – 4.6% increase to $4.04 – $4.10

Actual: 4.1% increase to $4.08

Forward yield: 7.59%

The tobacco company announced another 4% dividend increase for its 55th year of dividend growth.

Nordson Corporation (NDSN) – 62 years

Prediction: 3.7 – 5.1% increase to $2.82 – $2.86

Actual: 14.7% increase to $3.12

Forward yield: 1.22%

The specialty chemical company returned to its usual dividend growth rate of 15% after last year’s 5% increase.

Westlake Corporation (WLK) – 21 years

Prediction: 4.0 – 6.0% increase to $2.08 – $2.12

Actual: 5.0% increase to $2.10

Forward yield: 1.44%

As the materials company deals with a dramatic slowdown in earnings, Westlake pulls back on its dividend growth, with an increase below the company’s 15% growth rate over the last decade and well below last year’s 40% boost.

Predictions for Dividend Increases in September

There are 13 long-term dividend growth companies I expect to announce their annual increases in September. First, here are my predictions for two featured companies:

McDonald’s Corporation (MCD) – 49 years of dividend growth

The restauranteur has seen sales, revenues and earnings grow since bottoming out in 2020 due to the pandemic, and investors have seen accelerating dividend growth. Investors received a second straight year of 10% dividend growth from McDonald’s last year, resulting from 11% growth in global sales and 9% growth in adjusted EPS in 2022. The company repeated the sales growth and increased the EPS growth in 2023, posting an 18% boost in adjusted earnings. This growth demonstrates the success the company has had in shifting to online ordering, either through the internet or via restaurant-based kiosks.

So what type of dividend boost will McDonald’s announce in 2024? Well, the 2023 growth should drive another 10% dividend increase. However, growth has slowed at the company’s restaurants as the number of customers fall due to economic stresses. While this has been offset by what the company calls “average check growth due to strategic menu price increases”, it isn’t enough to offset the lower customer count. While revenues were up 2% in the first half of 2024, adjusted EPS – which had grown by double-digits last year – are down more than 6%. While the current payout ratio of 55% leaves room for McDonald’s to announce another good increase, I think the expectation of slower sales and income will convince the company to ease up a bit on the increase. Investors should look for a boost in the high single digit percentages.

Prediction: 6.6 – 7.8% increase to $7.12 – $7.20

Predicted Forward Yield: 2.47 – 2.49%

Microsoft Corporation (MSFT) – 22 years

The software company has three segments to its multi-trillion dollar market cap business: Productivity and Business Processes, which includes revenues from MS Office 365, OneDrive and LinkedIn; Intelligent Cloud, which handles all of Microsoft’s cloud and server businesses; and More Personal Computing, which includes revenues from Windows, hardware devices (including, for example, Microsoft’s Surface tablet), gaming (e.g., the recent Activision acquisition, Xbox), and Bing search.

Microsoft continues to hit it out of the park, despite its already massive revenue and free cash flow streams. The company just reported full year 2024 results and posted 16% growth in revenues to nearly a quarter-trillion dollars, 22% growth in net income to $88 billion, and 22% EPS growth to $11.80 a share. There was double-digit revenue and income growth across all three segments, with the exception of More Personal Computing segment income. Income there suffered due to the one-time costs of Microsoft’s acquisition of Activision.

Microsoft has posted rapid EPS growth over many years, mostly from the explosive growth of its cloud business. Despite the variations in EPS growth, Microsoft has grown its dividend at a very consistent rate of 10 – 11% annually. So, although the company can support a larger increase this year, investors will likely see another 10% dividend boost.

Prediction: 10.0 – 12.0% increase to $3.30 – $3.36

Predicted Forward Yield: 0.79 – 0.81%

Here are my predictions for 11 other long-term dividend growth companies which should announce annual increases in September:

Company # Yrs Industry Prediction (%) New Annual Rate Accenture plc (ACN) 13 Information Technology Services 7.4% – 8.9% $5.54 – $5.62 Accenture provides services to businesses and governments to incorporate technology and AI into their workflows. The company has posted double-digit dividend growth nearly every year since beginning to pay dividends, powered by excellent earnings growth. But with anticipated earnings growth of 2% in fiscal 2024, the company is unlikely to announce another 15% dividend increase like last year. Investors can expect dividend growth to slow to the upper single digit percentages. Predicted Forward Yield: 1.62 – 1.64% Brady Corporation (BRC) 39 Security & Protection Services 2.1% – 6.4% $0.96 – $1.00 The maker of identification and security products has been growing sales annually from a low in 2020, and earnings have been growing along with them. Despite the sales and earnings growth, Brady has established a consistent pattern of 2% annual dividend growth, preferring to focus on repurchasing its outstanding shares – over the last 5 years, the company has repurchased more than 15% of its shares. With 21% EPS growth in 2023 and another 13% expected in 2024, Brady has room for a good dividend increase. Despite this, I expect the company to continue its record of slow dividend growth, with a possibility of something a little larger. Predicted Forward Yield: 1.30 – 1.35% Fifth Third Bancorp (FITB) 14 Banks – Regional 5.7% – 8.6% $1.48 – $1.52 Despite a compounded dividend growth rate of 11% over the last decade, decreasing earnings caused the national bank to announce a 6% increase last year. Earnings have continued to decline slowly – in the 4 – 5% range – while expenses – mostly from interest paid on deposits – are growing. Fifth Third has a payout ratio below 50%, which gives it room for a 15th year of dividend growth, but investors can expect a boost similar to last year’s and not a return to double-digit growth. Predicted Forward Yield: 3.47 – 3.56% The First of Long Island Corporation (FLIC) 27 Banks – Regional 0% – 2.4% $0.84 – $0.86 The New York-based regional bank saw EPS fall more than 40% last year and is looking at another drop of 30% in the first half of 2024. If the trend continues for the rest of the year, First of Long Island will have a payout ratio of slightly more than 100% which is not sustainable. I expect the company to either hold the dividend steady or announce a small increase to keep the dividend growth streak going. Predicted Forward Yield: 6.58 – 6.73% Honeywell International Inc. (HON) 14 Conglomerates 3.7% – 5.6% $4.48 – $4.56 The industrial conglomerate continues to grow sales and adjusted EPS; sales growth of 3% in 2023 resulted in 5% adjusted EPS growth. Going forward, Honeywell is expecting sales growth to accelerate, and is raising its sales guidance, but is expecting margins to drop slightly, resulting in the company lowering adjusted EPS growth guidance from 12% to just shy of 11%. That bodes well for Honeywell’s 2025 dividend increase but given the mid-single digit growth last year, I expect the company to hold off announcing a large payout boost. Predicted Forward Yield: 2.15 – 2.19% Lockheed Martin Corporation (LMT) 22 Aerospace & Defense 7.0% – 8.9% $13.48 – $13.72 The aerospace and defense contractor has four primary business segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. 2023’s sales were down across three of the four segments, the only exception being the Space segment, whose large profits more than made up for small losses across the other three segments, driving the company’s EPS growth to 27%. Lockheed’s dividend growth has slowed over the last several years, while the company has bought back nearly 15% of its outstanding shares over the last 5 years. While you might expect that 27% EPS growth would drive a good dividend increase, the company is guiding to full year 2024 EPS slowing by about 5%. I think this will push Lockheed to accelerate its dividend growth from last year’s 5%, but not back to double-digit growth. Predicted Forward Yield: 2.37 – 2.42%. New Jersey Resources (NJR) 29 Utilities – Regulated Gas 7.1% – 9.5% $1.80 – $1.84 The energy services and utility company has a very consistent 7 – 8% annual dividend growth rate. Investors can expect this to continue, as NJR is projecting an 8.1% adjusted EPS growth rate in 2024 after growing 8% in 2023. Most of this growth is coming from the company’s Energy Services segment, which provides transaction services for natural gas contracts. Watch for another year of 7 – 8% payout growth. Predicted Forward Yield: 3.89 – 3.97%. OGE Energy Corp. (OGE) 19 Utilities – Regulated Electric 1.0% – 2.0% $1.693 – $1.71 Dividend growth has sharply decreased as earnings flattened out at the Oklahoma-based utility – over each of the last two years, the company has boosted its payout by only 1%. With EPS down 4% in 2023 and expected to be up only 2 – 3% in 2024, investors should expect a third year of minimal dividend growth. Predicted Forward Yield: 4.28 – 4.32%. Philip Morris International Inc. (PM) 16 Tobacco 3.8% – 4.6% $5.40 – $5.44 While the cigarette business is slow-growing, Philip Morris is seeing explosive growth in its vaping products, primarily under the IQOS brand. The volume of vaping consumables or, as the company describes them – heated tobacco units (HTUs) was up 15% in 2023, followed by another 13% growth in 2024. This powered 2023 EPS growth to 11%, with the company guiding to another 5 – 7% growth in 2024. Investors can expect dividend growth to accelerate from last year’s 2.4% increase to closer to 4%. Predicted Forward Yield: 4.38 – 4.41%. Starbucks Corporation (SBUX) 14 Restaurants 3.5% – 7.0% $2.36 – $2.44 Starbucks’ dividend growth rate has been dropping over time just by virtue of the company’s size. After starting its dividend growth history with 25% increases, Starbucks’ annual increases have fallen to last year’s 7.5%. Although EPS growth in 2023 was 27%, I doubt investors will see dividend growth accelerate since EPS growth is flat in the first 9 months of 2024. Look for a boost in the mid-to-high single digits. Predicted Forward Yield: 2.50 – 2.58%. Verizon Communications Inc. (VZ) 20 Telecom Services 0.8% – 2.3% $2.68 – $2.72 The telecommunications company is suffering from decreasing earnings. And with this, dividend growth has slowed to a crawl. Last year’s 1.9% boost didn’t even hit Verizon’s 5-year growth average of 2.0%. The company posted a 9% drop in adjusted EPS in 2023 and is expecting another 2% drop in 2024. While the payout ratio is a relatively low 60%, all this means is that investors will see yet another year of slow dividend growth. Predicted Forward Yield: 6.41 – 6.51%. Click to enlarge

Summary

August brought some nice increases from long-term dividend growth companies. Notably, there were five companies with half century records of growing dividends, including two that are beginning their 8th decade of dividend growth. Utility American States Water and industrial company Dover have 71 and 70 year records of dividend growth respectively, which are among the longest histories of dividend growth among publicly traded companies. Joining them with 50+ year records are REIT Federal Realty Trust, tobacco company Altria, and industrial conglomerate Nordson, having extended their records to 58 years, 55 years and 62 years, respectively.

And despite their long histories of growth, a few of these companies managed to reward investors with very nice increases. Nordson announced a 15% payout boost and American States Water announced an 8% increase. Other companies announcing nice increases in August include instrumentation company Badger Meter, with a 26% increase, industrial company Carlisle, with an 18% increase, and financial software company Intuit, with a 16% boost.

I’m not expecting as many large increases in September. The highlight should be a 10%+ increase from Microsoft, and high single digit percentage increases from McDonald’s, defense contractor Lockheed Martin, and utility New Jersey Resources. In contrast, communications company Verizon, utility OGE, and regional bank First of Long Island will likely announce enough of an increase to keep their dividend growth streaks going.

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